Texas Leading U.S. Out of Housing Mess
Folks are camping out on the sidewalks to place offers on homes like they did in 2006. And while there hasn't been word of a bidding war in eons, sales are brisk, particularly in the entry-level categories.
Foreclosures are still an issue, but because Texas real estate never spiked and bubbled like certain West Coast and East Coast markets, it never plunged after the fall. And Texas will be the first state to recover from the housing market downturn, leading other states out of the real estate doldrums, says Mike Inselmann, founder of Metrostudy Inc. His Texas-based company tracks home building nationally, and Inselmann made those forecasts to the National Association of Real Estate editors as they met last week in one of the state's hot real estate markets, Austin.
Houston and Dallas/Fort Worth already lead the nation in home-building and population growth, Inselmann told the journalists. The ready supply of new housing in Texas kept prices from overheating. Going back to 1995, Dallas/Fort Worth never got to 10 percent gains in annual home prices, he said, while many markets on the West Coast, and in Florida, Nevada and Arizona did.
Actually, some homes in those areas gained more than 10 percent. Other experts say that the ease of building in Texas also helps keep new homes affordable. When builders don't have to dish out thousands in fees, extra permits and entitlements, they can pass the savings along to buyers. When it doesn't take them years to get approvals, they can have new inventory up in three to six months.
Of course, there are some who say Texas builders rule the roost here.
According to Metrostudy, nationwide home starts are expected to be up about a quarter this year from 2009. The first-time homebuyer tax credit spurred many sales; Wells Fargo reported that 47 percent of real estate sales were to first-time homebuyers.
Now that the credit has expired, the market is cooling. Builders agree that the market has slowed since the credit expired, and now it's a waiting game to see what happens when the real estate market tries to go cold turkey without its booster shot. Veteran agent Tom Rhodes of Dave Perry-Miller points to another reason for the slowdown. He says summer sales in Texas are always slow as people escape the heat.
Home starts in the Dallas/Fort Worth area jumped more than 50 percent in the first quarter, as builders started houses to meet the demand partly caused by the tax credit.
But the pre-owned market shined, too. North Texas pre-owned home sales were up 18 percent in May, the third month in a row of double-digit gains -- fabulous news after negative rates for more than a year. The median price of a pre-owned home in Dallas rose to $151,980, up 2 percent from 2009. And the number of homes on the market was down 2 percent, leaving a 6.6-month supply of inventory. Real estate pros say a six-month home supply is healthy.
Of course what everyone wants to know is -- are we there yet? Have we hit bottom?
The answer seems to be maybe. According to Dr. James Gaines of the Real Estate Center at Texas A&M University, we'll know more in October because we're still on a high from the juicing up of the homebuyer's credit. Foreclosures will stay high, says Gaines, and interest rates are still low.
Gaines also says the banks really don't want to loan out money. Part of the reason why the market is so constipated -- the banks are hoarding cash and buying government securities. When it's hard to get a loan and hard to get an appraisal, it's a tough time to move inventory. Finding jumbo loans is like finding a needle in a haystack. Which is why, even in Texas, the luxury market is selling -- but not without major price concessions. Even the most expensive spec home in town recently lowered it's price, and word is that a buyer is seriously circling.
But here's a scary thought from Dr. Gaines: Shadow inventory – those are vacant homes and condos not even offered for sale right now -- could number as many as 9 to 12 million units. Normal is less than 5 million. Trulia reports that in three Texas cities -- San Antonio, Arlington (between Dallas and Fort Worth) and El Paso -- it's cheaper to buy a home than to rent. In Dallas, the numbers are close, but it appears to be cheaper to rent here than buy.
Gaines says that we need to keep a sharp eye on employment, which is the secret sauce to getting the real estate market buzzing. And there, too, is more reason to thank God if you live in Texas: We are losing jobs at a rate of only 2.5 percent, not the current nationwide average of 9.7 percent, but we are a youthful state, gaining population. One local tale: You can't find a U-Haul from California to Texas because everyone's renting them.
And if he had to call it? Inselmann said that the U.S. home market is "on the bottom and edging up."
See homes for sale in Texas at AOL Real Estate.